Emerging markets, dependent on mature market consumption, are teetering on the edge of Bankruptcy as Private capital inflow has been drying up and is forecast to reduce by half next year. The volume of world trade is set to decrease by 2.1%, the biggest drop for 33 years. Oil exporting countries from Venezuela to Russia are seeing revenue crash as demand across the world decreases. Poor countries, on the other hand, have experienced a decrease in the cost of living as food and oil prices drop. In an unforeseen twist of fate, Globalisation has enriched poorer countries and impoverished richer ones. I wonder if the IMF and the World Bank had seen this coming when they were busy raping the Third World to reap big profits for their First World clubmates ?
Greece is in the throes of a revolution as their people mount a massive protest against the country's history of corruption and economic mismanagement. Originally born of the alleged murder of a 15 year old boy by Greek police, the momentum was maintained by deeply rooted history. Is this a sign of things to come ? As economic conditions deteriorate across every continent, blame will be apportioned and it won't be hard to find easy targets. Shortage of food, homelessness, unemployment are now realities for an ever increasing number of people who have never known a life like this before. We are watching our own Governments waste the money we could be using constructively to prepare and mitigate for harder times. Attempts to restore the economic activity of nations through liquidity injections in to failing banks will achieve nothing when the basics of this same economy rely on a volume of activity that was sustained by inflated wealth through credit. The only reason we bought so much stuff was because we could always pay the bill off later.
So there is no big surprise that "We're almost in an air pocket, where we don't have a new global driver of growth." as said by Thomas Mayer, the chief European economist for Deutsche Bank. Sorry Thomas, we're all tapped out. Unrealistic growth was the problem in the first place. Growth of an economy through a regulated monetary system, consumer saving, profits ploughed back in to production, balanced budgets is one thing, but unhinged consumption and imaginary accounting by the Financial "Industry" to inflate wealth was always destined to arrive at cardiac arrest. Financial companies are supposed to provide credit to individuals and real industries to grow the economy. When they discovered that there was money to be made giving loans to anyone who could hold a pen, they officially became usurers. When they opened the casino and took bets on anything that could go one way or another, from the economic health of a country to whether interest rates would go up or down, they opened the gates to their own destruction and consequently that of their victims. The short buck rules. Wall St. dependency worse than a heroin addict, all cheerled from the side by "regulators" and Governments alike. Even ordinary citizens got caught up in the act as dotcom stocks were bought and sold like candy. We have a Stock market that may as well take it's cue from the atmospheric conditions on Pluto. It certainly has nothing to do with economic realities on the ground. This is the downside, but always a time to profit. Money can still be squeezed out of the system as the addicts bet on who is going to die first.
Unbridled greed has brought the World to it's knees. A new paradigm is desperately needed to restore sanity to a world gone mad. As we travel the downside we cannot expect the same failed mechanisms to save us. The actions of Governments the world over so far is to try and blow air in to a burst balloon; no matter how hard they blow it will never be able hold it's form. It's time to admit that we have overextended the system to the inevitable breaking point and now the remaining pieces must be reassembled in to something that does not need wizardry to keep it upright.
"It is not just a supply shock," Lin said. "It is not just a drop in demand; it is a lack of availability of credit."
The institutions that were supposed to be the source of credit have gambled themselves into bankruptcy. Now it's time for sustainability.